For some Florida lawyers, small courtroom wins for clients mean huge fees for themselves

Lawsuits against auto insurers can be lucrative

January 15, 2011|By Sally Kestin and John Maines, Sun Sentinel

In Palm Beach County, a lawsuit ended in a judgment of $1, but the prevailing attorneys collected $5,500 in fees.

In Broward County, a $3,700 dispute meant a payout of about $90,000 for the winning lawyers.

Thousands of lawsuits like these are being filed against insurance companies in Florida over medical bills from auto accidents. Disputes over a few hundred dollars or less can mean huge payouts for the attorneys doing the suing, and, according to state regulators, higher premiums for all Florida drivers.

In South Florida, lawyers have fought insurers in court over $2.53, $1.19 and even one penny. The attorneys say they're keeping insurance companies honest and blame them for the costly courtroom battles.

"These [insurers] are denying claims for no valid reason," said Cris Boyar of Margate, who devotes nearly all of his law practice to insurance disputes. "They create this massive amount of litigation."

Florida insurance regulators say the filing of lawsuits is out of control, and efforts to change the system are being proposed in Tallahassee.

"Lawyers and other people in this field have found ways to make some money here," said Deputy Insurance Commissioner Belinda Miller. "The lawsuits are increasing because this has become a fairly well-oiled machine on the side of the people that bring those cases, and it's lucrative."

Florida's largest auto insurer, State Farm, is "seeing more suits than we ever have," said Russ Kile, claim section manager. "It's all over the state."

United Automobile Insurance Co., based in Miami Gardens, has spent about $80 million in the state over the past four years fighting lawsuits. "In the end, the public pays for this," said CEO Richard Parrillo.

The lawsuits result from the personal injury protection insurance that all Florida drivers are required by law to buy. The insurance, commonly known as PIP, kicks in when the policyholder or others are injured in a car accident and covers up to $10,000 in medical expenses, lost wages and death benefits.

Established in the 1970s, Florida's no-fault system was supposed to ensure that accident victims are treated promptly and limit lawsuits by eliminating the need to prove who caused the crash.

According to the insurance industry, it helped open the floodgates for suits over medical bills.

"If anything, it's caused more lawsuits," said Ron Poindexter, director of the industry-funded National Insurance Crime Bureau in Florida and three other states. "It's a public feeding trough."

Many PIP claims end up in court because the insurers underpay what may be owed or deny payment on bills they believe are not legitimate. Insurers say they are sometimes slow to pay or cut off benefits because accident victims and medical providers file so many fraudulent claims. Florida leads the nation in accidents staged to cash in on PIP benefits, according to the NICB.

Lawsuits are also filed over technicalities — a missed deadline or a form not properly filled out.

In Broward County, more than 23,500 PIP-related suits have been filed against insurance companies since 2006 — one-third of those to recover amounts less than $500, a Sun Sentinel analysis of court data found. Data for Palm Beach County were unavailable.

Fees drive suits?

Insurers say the motive in many suits is the fees lawyers hope to collect. Those bringing suit are entitled to fees if they win. Insurers can collect fees only if they prove a case is frivolous or the other side rejects an offer to settle for an amount near what is recovered.

The cases are filed mainly in county court, where the maximum claim is $15,000, but there's no limit on how much the attorneys can make. Some suits drag on for years, with the lawyers billing for hundreds of hours at rates as high as $500 an hour.

Attorneys filing the suits say that insurers prolong the cases and drive the fees up.

State Farm lost a lawsuit in Central Florida about a decade ago that became the "poster child" for PIP suits, said Chris Neal, a spokesman for the insurer. Heidi Kraengel claimed a 1995 car accident left her with jaw discomfort but did not seek medical treatment for it for three months, and State Farm denied her claim.

Kraengel filed suit in Seminole County, and a jury ruled in her favor. The $12,000 award resulted in nearly $600,000 for Kraengel's attorneys. The court case consisted of 14 volumes, 2,440 pages, numerous hearings and expert witnesses, including an astrophysicist that State Farm brought in.

"After that, lawyers got extremely aggressive with these suits because they can be really lucrative," Neal said.

United Auto, which insures mostly high-risk, low-income drivers, has been sued more than any other insurer in Broward — more than 5,900 times since 2006. PIP lawyers said United brings on the suits by denying large numbers of claims.